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Canada's national weekly current affairs magazineSun, 02 Aug 2015 22:36:52 +0000en-UShourly1http://wordpress.org/?v=4.2.2Rare who’s who of 19th century autographs goes up for auctionhttp://www.macleans.ca/news/canada/rare-whos-who-of-19th-century-autographs-goes-up-for-auction/
http://www.macleans.ca/news/canada/rare-whos-who-of-19th-century-autographs-goes-up-for-auction/#commentsThu, 12 Sep 2013 08:36:23 +0000http://www2.macleans.ca/?p=421855VANCOUVER – When dignitaries, musicians, sideshow performers or generals showed up for an audience with the U.S. president, they were greeted by a doorman who welcomed them to the executive…

]]>VANCOUVER – When dignitaries, musicians, sideshow performers or generals showed up for an audience with the U.S. president, they were greeted by a doorman who welcomed them to the executive mansion — later the White House — and asked for their autograph.

Over 40 years and through eight presidents, German immigrant Maj. Charles D.A. Loeffler amassed a signature collection that reads like a who’s who history of the influential, talented and powerful of the 19th century. His autograph book is now up for auction in Vancouver Sept. 18, along with various oddments of fine art, jewelry, furniture, antiques and dinosaur bones.

Loeffler policed the White House door from 1869 to 1909 for Presidents Ulysses S. Grant through to Theodore Roosevelt.

Maynards Fine Art & Antiques senior appraiser Neil McAllister said Loeffler was known at the White House for asking for the signatures of those visiting the presidents.

“So even during his time, people were almost expecting to be asked,” he said.

Loeffler, gathered nearly 300 signatures of everyone from the presidents he worked with to foreign politicians and dignitaries.

“He collected the signatures of various politicians, stars, writers, historic figures. He collected this for himself. When he retired, he put it all together in this album,” McAllister said.

The album includes the signatures of Ulysses S. Grant, Winston Churchill, Theodore Roosevelt, The Queen of Hawaii, Buffalo Bill Cody, P.T. Barnam, and many others.

American author and humorist Mark Twain signed both his pen name and his real name, Samuel Clemens.

“It covers the whole gamut,” McAllister said.

“Another interesting fact is a lot of the signatures have dates associated with them, so if you’re interested in doing research, put the name in and find out why this person is at the White House, for what purpose.”

Charles Tupper, who served as Canada’s prime minister for only 10 weeks, signed.

Maynards vice-president Hugh Bulmer said Loeffler knew how to open doors and had good connections.

“This is unique. It’s one-off. There was only one doorman at the White House, only one person who could possibly amass a collection of this type over a short period of time,” he said. “There will be a lot of people chasing this piece.”

The auction house has valued the book at between $10,000 and $15,000.

McAllister said they would expect interest from Americans and political history buffs because of the political signatures.

Such autograph books aren’t unique, but the effort taken to collect the signatures over a 40-year period does make it special, McAllister said.

“The fact that it’s a known entity really gives us some good provenance. You can go on Google, you type in the officer’s name, you’ll see lots of information about this specific officer.”

The seller wanted to remain anonymous.

Up until about 40 years ago, the autograph collection was in the possession of Loeffler’s family.

“The consignor only knows the book was acquired in the 1970s in New York … from whom is unknown,” said Maynards media spokeswoman Sara McCormick in an email.

]]>http://www.macleans.ca/news/canada/rare-whos-who-of-19th-century-autographs-goes-up-for-auction/feed/0Humble, rare 1913 Liberty Head nickel with storied history likely to fetch millionshttp://www.macleans.ca/general/humble-rare-1913-liberty-head-nickel-with-storied-history-likely-to-fetch-millions/
http://www.macleans.ca/general/humble-rare-1913-liberty-head-nickel-with-storied-history-likely-to-fetch-millions/#commentsTue, 29 Jan 2013 21:11:03 +0000http://www2.macleans.ca/?p=344194RICHMOND, Va. – A humble 5-cent coin with a storied past is headed to auction and bidding is expected to top $2 million a century after it was mysteriously minted.…

]]>RICHMOND, Va. – A humble 5-cent coin with a storied past is headed to auction and bidding is expected to top $2 million a century after it was mysteriously minted.

The 1913 Liberty Head nickel is one of only five known to exist, but it’s the coin’s back story that adds to its cachet: It was surreptitiously and illegally cast, discovered in a car wreck that killed its owner, declared a fake, forgotten in a closet for decades and then found to be the real deal.

It is expected to fetch $2.5 million or more when it goes on the auction block April 25 in suburban Chicago.

“Basically a coin with a story and a rarity will trump everything else,” said Douglas Mudd, curator of the American Numismatic Association Money Museum in Colorado Springs, Colo., which has held the coin for most of the past 10 years. He expects it could bring more than Heritage Auction’s estimate, perhaps $4 million and even up to $5 million.

“A lot of this is ego,” he said of collectors who could bid for it. “I have one of these and nobody else does.”

The sellers who will split the money equally are four Virginia siblings who never let the coin slip from their hands, even when it was deemed a fake.

The nickel made its debut in a most unusual way. It was struck at the Philadelphia mint in late 1912, the final year of its issue, but with the year 1913 cast on its face — the same year the beloved Buffalo Head nickel was introduced.

Mudd said a mint worker named Samuel W. Brown is suspected of producing the coin and altering the die to add the bogus date.

The coins’ existence wasn’t known until Brown offered them for sale at the American Numismatic Association Convention in Chicago in 1920, beyond the statute of limitations. The five remained together under various owners until the set was broken up in 1942.

A North Carolina collector, George O. Walton, purchased one of the coins in the mid-1940s for a reported $3,750. The coin was with him when he was killed in a car crash on March 9, 1962, and it was found among hundreds of coins scattered at the crash site.

One of Walton’s heirs, his sister, Melva Givens of Salem, Va., was given the 1913 Liberty nickel after experts declared the coin a fake because of suspicions the date had been altered. The flaw probably happened because of Brown’s imprecise work casting the planchet — the copper and nickel blank disc used to create the coin.

“For whatever reason, she ended up with the coin,” her daughter, Cheryl Myers, said.

Melva Givens put the coin in an envelope and stuck it in a closet, where it stayed for the next 30 years until her death in 1992.

The coin caught the curiosity of Cheryl Myers’ brother, Ryan Givens, the executor of his mother’s estate. “He’d take it out and look at it for long periods of time,” she said.

Givens said a family attorney had heard of the famous 1913 Liberty nickels and asked if he could see the Walton coin. “He looked at it and he told me he’d give me $5,000 for it right there,” he said, declining an offer he could not accept without his siblings’ approval.

Finally, they brought the coin to the 2003 American Numismatic Association World’s Fair of Money in Baltimore, where the four surviving 1913 Liberty nickels were being exhibited. A team of rare coin experts concluded it was the long-missing fifth coin. Each shared a small imperfection under the date.

“The sad part is my mother had it for 30 years and she didn’t know it,” Cheryl Myers said. “Knowing our mother, she probably would have invested it for us. She always put her children first.”

Since its authentication, the Walton nickel has been on loan to the Colorado Springs museum and has been publicly exhibited nationwide.

The coin will be up for grabs at a rare coin and currency auction.

Todd Imhof, executive vice-president of Heritage, said the nickel would likely attract lofty bids that only a handful of coins have achieved at auction. That includes $8 million paid for a 1933 double eagle, a $20 gold coin, or the world-record $10 million paid Jan. 24 for a 1794 Flowing Hair silver dollar.

“This is a trophy item that sort of transcends the hobby,” he said. “It’s an interesting part of American history and there are collectors who look for something like this.”

Ryan Givens said he’s not keen on selling the nickel.

“First of all, it had been in the family for so long,” he said. “It’s not like something you found in a flea market or something you just found.”

Cheryl Myers said they’re often asked why they held on to the coin for a decade after they learned it was authentic instead of immediately cashing it in.

“It was righting a 40-year-old wrong,” she wrote in an email. By allowing the American Numismatic Museum to display it for the past decade, it was honouring Walton’s wishes.

]]>Justin Trudeau’s $1,600 lunch
The fourth annual What a Girl Wants fundraiser for the Canadian Liver Foundation featured local firefighters peeling off their uniforms, and a performance by drag queen Dixie Landers, who lip-synched to Bette Midler’s cover of Boogie Woogie Bugle Boy. The performer wore bright pink stilettos and received a compliment from none other than Laureen Harper, who told Ms. Landers, “I love your shoes.” Hollywood glamour was the dinner’s theme, and each table in the Fairmont Château Laurier ballroom was named after a silver screen icon. Mrs. Harper sat at the Marilyn Monroe table along with Justin Trudeau and one of the evening’s organizers, Annette Martin of the Canadian Liver Foundation (and wife of National Post columnist Don Martin). One table over sat Liberal MP Hedy Fry, sporting a Marilyn Monroe purse and matching shoes. Labour Minister Lisa Raitt showed off a small pink glittery purse she picked up at Wal-Mart for $5. Among the items auctioned off that night: lunch with Trudeau. When Capital Diary asked Mrs. Harper if she planned to bid, she quipped, “I just had dinner with him.” The Liberal MP fretted, tongue-in-cheek, that his new moustache—grown to support the Movember prostate cancer awareness campaign—might have a negative impact on bidding. So Trudeau took to the catwalk, loosening his tie, which raised appreciative cheers—and $1,600 for the charity. Liberal MP Kirsty Duncan bid $500 and won a Sex in the City jewellery cuff worn by Kim Cattrall’s character Samantha Jones. Duncan plans to donate the piece to another liver charity in honour of a Grade 9 student she mentored in her senior year of high school. They formed a close bond, but the younger student subsequently died of liver disease.

What worries Peter MacKay’s date
The National Arts Centre hosted Ottawa’s Gold Medal Plates dinner to raise funds for the Canadian Olympic Foundation. Decorated Olympians in attendance included Alexandre Bilodeau. Once again, Defence Minister Peter MacKay’s date for a high-profile function was former Miss World Canada and women’s rights advocate Nazanin Afshin-Jam. They have been seeing each other for seven months now, says one Tory MP. Afshin-Jam, who lives in Vancouver, is working on a book about her life and the life of Nazanin Fatehi, an Iranian woman sentenced to death after stabbing one of the men who attempted to rape her. Afshin-Jam took up Fatehi’s cause several years ago, and Fatehi was eventually released. The two Nazanins stayed in touch but have never met face to face; Fatehi is illiterate, so they’ve relied on phone calls. But in the last seven months they have lost contact, and Afshin-Jam fears the worst. The international spotlight is no longer on the case, and the family of the rapist, says Afshin-Jam, had sworn revenge.

Why Harper can’t grow a moustache
Justin Trudeau isn’t the only MP flaunting facial hair for Movember. The NDP presented their own Pat Martin the Chia Pet award for best moustache so far. Another NDP MP, Peter Stoffer, has gone one step further and now has a full beard. Liberal MP Scott Simms has a handlebar moustache. Some female MPs on the Hill are not exactly impressed with their colleagues’ new look. “Some of them look like villains and porn stars,” quipped one Liberal. Others joked about donating to charity only if Liberal MP Dominic LeBlanc agrees to shave his moustache off early, because he now bears a striking resemblance to adult film legend Ron Jeremy. Liberal foreign affairs critic Bob Rae has the sparsest growth on his upper lip but that is because, he says, he started a week late; he was in the Middle East, where he wanted to be clean-shaven. Don’t expect Stephen Harper ever to have a moustache, by the way. Laureen Harper made it clear she couldn’t abide one on her husband.

]]>http://www.macleans.ca/general/mitchel-raphael-on-trudeau/feed/9Absinthe and logarithmshttp://www.macleans.ca/authors/colby-cosh/absinthe-and-logarithms/
http://www.macleans.ca/authors/colby-cosh/absinthe-and-logarithms/#commentsWed, 17 Mar 2010 22:18:59 +0000http://www2.macleans.ca/?p=116285(Reuters) – Christie’s has put a record price tag on an important Picasso painting from his celebrated Blue Period that will be offered for sale in London in June. Portrait …

]]>(Reuters) – Christie’s has put a record price tag on an important Picasso painting from his celebrated Blue Period that will be offered for sale in London in June. Portrait of Angel Fernandez de Soto (The Absinthe Drinker), dated 1903, is expected to fetch 30-40 million pounds ($45-60 million), the highest pre-sale estimate for any work of art offered at auction in Europe.

I don’t know if anyone else does this, but I think about art prices on a logarithmic scale, the way we rate earthquakes and loud noises. Van Gogh’s Portrait of Dr. Gachet (I), which sold for $138 million in today’s dollars, would be an 8.1. The most expensive single works by Jeff Koons or John Singer Sargent are around 7.4. Mary Cassatt’s about a 6½; Borduas or Kurelek, around 5½; and so on, right down to the creators of embroidery samplers at your local craft fair. Logarithms make things like this a lot more comprehensible; they make the whole Great Chain of Being visible, they permit interpolation and prediction, and they run almost from 1 to 10. To 9, anyway, if you assume that there are objets d’art with a hypothetical market value of nearly a billion dollars, which there surely are. It’s not important how much an artwork or an artist’s oeuvre is worth at auction, of course, except that an ounce of revealed preference is worth a ton of gum-flap.

Picasso has a lot of paintings still changing hands between collectors and is therefore always contending for nominal-dollar auction records. It’s interesting to me to find him still doing so 40 years after his death; somebody paid a magnitude-8 price for a Dora Maar painting a few years ago. How much of Picasso’s standing in the marketplace comes from the plain fact that he became synonymous with “painting” during his life—largely on the basis of bluster and myth and populist touches and, above all, surviving the big wars cockroach-fashion—and that, as a result, even dumb people have heard of him and have a shot at recognizing his work? I am inclined to think the answer is “A lot”. Nor does it hurt that there’s a lingering fragrance (or stench) of Old Left romanticism attached to his name.

I don’t mean to suggest that these features of Picasso are not every bit as “real” as his technical gifts or his innovativeness, but when one considers these paintings as equities, as items that will have a certain resale value in the year 2100, the social resonances that accompany the man’s name are bound to fade in memory. I wonder if he will remain an 8. When some Japanese executive pays that kind of price for a good Van Gogh, he’s paying for Van Gogh’s power—acquired by being spiritually injured in a certain way, at a particular place and time—to endow ordinary objects and scenes with a particular beauty and cosmic significance. Van Gogh might not be your particular cup of cadmium, but somebody will definitely still feel that way about those paintings in the future. It’s a lot harder to be sure about Picasso, at least in his various 20th-century incarnations.

]]>http://www.macleans.ca/authors/colby-cosh/absinthe-and-logarithms/feed/38Why the recession is here to stayhttp://www.macleans.ca/economy/business/why-the-recession-is-here-to-stay/
http://www.macleans.ca/economy/business/why-the-recession-is-here-to-stay/#commentsFri, 02 Oct 2009 15:45:20 +0000http://www2.macleans.ca/?p=85100Prepare for more pain—this recovery is only a blip

]]>When U.S. marshals put Bernie Madoff’s Long Island mansion on the block last month, few expected much action. Sales of luxury homes have been as dead as the lowly subprime market—and surely the oceanfront playground of a disgraced Ponzi fraudster would be hard to move. Then something astonishing happened. A furious bidding war erupted, and the house sold in mid-September for US$8.75 million in cash, well over the asking price. Madoff’s US$65-billion scam may have embodied all the lying, cheating and greed that got us into the Great Recession, but the frenzy for Bernie’s old digs shows that the froth is back, alive and well.

Evidence of reawakened exuberance is everywhere. Bidding wars are breaking out all over North America. In Costa Mesa, Calif., one 1,300-sq.-foot home drew 68 offers and sold for nearly US$100,000 above the asking price. In Vancouver, dozens of potential buyers reportedly drove the price of a tiny bungalow in the popular Kitsilano neighbourhood up $180,000 above the asking price, to $1.14 million. Condo projects that looked gaudy and excessive amid the new frugality of April are now back on the block as the latest must-haves. Toronto’s struggling 1 Bloor megaproject surged back to life last week with new developers. In Vancouver, the radio waves are filled with ads for home-equity loans and marble countertops, and luxury retailers are beating down the doors in Calgary. Next month Holt Renfrew will open a new store there, three times larger than its existing one, and featuring a boutique from French luxury giant Hermès, famous for its $7,000 Birkin bags. Conspicuous consumption didn’t die after all. It was just hibernating.

Barely six months after fretting about the end of the world, analysts and economists are suddenly transfixed by a more welcome finale: the end of the recession. Along with the housing market comeback, retail sales, a key measure of how the all-important American consumer is feeling, are on the rise. Most economists now forecast that, at least for the next few quarters, U.S. GDP will expand at a rate as high as four per cent, while Canada already saw a 0.1 per cent uptick in June. But the surest sign of euphoria can be seen in the raging markets. The S&P 500 has jumped a whopping 58 per cent since bottoming out in March; its counterpart in Toronto is up 53 per cent. Even if markets haven’t fully recovered from their recession lows, the surge in prices has suddenly made people feel a lot wealthier and more confident again, and that’s helped drive everything from auto to home sales. “We’re clearly out of a very dark hole,” says Glen Hodgson, chief economist with the Conference Board of Canada.

So why, then, does it all seem too good to be true? It’s hard to swallow the notion that “the worst crisis since the Great Depression,” as it was repeatedly described last winter, could, seemingly overnight, become little more than “the most inconvenient downturn since 1991.” The only truly substantive change has been the rebound in consumer confidence and investor sentiment. In other words, investors are driving the rally with their hearts, and not their heads.

Which is why some experts are warning there is still a lot more pain to come. In many cases, they were the same rare voices who accurately predicted the subprime mortgage collapse, credit crisis and recession. Just as the phenomenal rise in stock markets is built on hope, and not fundamentals, improvements in the economy are due almost entirely to the wheelbarrow loads of government stimulus money, and nothing more. A real, sustainable recovery is still five or 10 years away. Which means we should be preparing for America’s lost decade. What that means for Canada is painfully clear. We may have avoided the worst of the crisis—our banks are sound, unemployment is lower here and the housing market more stable—but Canada remains inextricably linked to the U.S. economy, and continued pain there threatens to drag this country’s economy down further.

“It’s not a case of being bullish or bearish, it’s being totally realistic about what happens after an epic US$14-trillion loss of household net worth,” says David Rosenberg, chief economist at Gluskin Sheff + Associates in Toronto. “It doesn’t mean we’re going back into a recession, it means that we’re going to have a period of stagnant U.S. economy that’s going to have an impact across the globe, including Canada.”

This past July, the U.S. government rolled out an incentive program called the Car Allowance Rebate System, better known as “cash for clunkers.” The idea was simple. Over the next four months, it would spend US$1 billion offering people as much as US$4,500 to turn in their beaters and buy new, fuel efficient vehicles. So many jumped at the offer that, within a week, the money was gone. Another US$2 billion was added to the program. By late August, that was gone too, as nearly 700,000 cars were purchased with the help of Uncle Sam. Cash for clunkers, which single-handedly reversed years of auto industry floundering in less than 30 days, will likely go down as one of the most successful examples of government stimulus, ever.

The economic growth that has buoyed so many hopes of a turnaround has been driven—particularly in the U.S.—almost entirely by this kind of public spending. It’s brought key economic indicators like retail sales back to life, and forecasters have eagerly jumped on this as a sign the worst is over. But there are crucial elements integral to a healthy economy that are completely absent from this recovery picture, like the return of private investment and jobs. As successful as direct government handouts have been in the U.S, there’s little indication of progress on either front. “As long as the government is giving money away, people are going to spend it,” says Mike “Mish” Shedlock, of Sitka Pacific Capital Management. “Those are not conditions that cause a sustainable recovery.”

Managing this kind of artificial growth presents a difficult balancing act for governments, says the Conference Board’s Hodgson. If stimulus spending is shut down too early, it could quickly throw the economy straight back into recession (what’s known as a double-dip recession). Keep spending too long, and suddenly the government is competing with the private sector, overheating the economy as it drives up input prices and, eventually, interest rates. Jack Ablin, chief investment officer at Harris Private Bank in Chicago, argues that stimulus spending is clearly working, and could pave the way for as many as four quarters of growth. But he likens this to someone running a marathon on a diet of crullers. “It’s hard to know how much of this recovery is real and how much is just fuelled by these doughnuts,” he says. “A year from now, we’re going to be at a crossroads.”

This was the same challenge facing policy-makers during the Great Depression. Through the 1930s the U.S. government spent heavily to stimulate the economy. When it stopped, another steep recession followed in 1937. Similarly, Japan suffered a recession relapse in 1997—seven years after its economy crashed—when it tried to tighten up its fiscal situation, notes Rosenberg.

To add to the difficulty, the U.S. will have to come to terms with the trillion-dollar deficits this spending is helping create. Many economists worry that America’s creditors will stop lending in the face of such impossibly huge debts, forcing a spike in interest rates, inflation and maybe a whole new crisis.

But perhaps most discouraging of all is the fact that the conditions behind this short-term recovery look eerily similar to those seen during the lead-up to the crash in late 2007. At that time, consumers were over-leveraged, borrowing on credit cards and against their mortgages, buying homes they couldn’t afford with zero per cent mortgages and cars with money they didn’t have. That was driven by a long period where interest rates were kept too low for too long. That tactic is still being used today to try to encourage reluctant consumers. Only this time, consumers are in no condition to play along. In Canada, debt levels are still rising. Bankruptcies were up 36 per cent in July. In a recent survey, the Canadian Payroll Association found that more than half of Canadians say they are living paycheque to paycheque. The U.S. consumer is even more beaten, says Shedlock. “We still have rising credit card defaults, rising foreclosures. Neither of those conditions have been addressed.”

All this could play out with predictably disastrous results. And nowhere is that more obvious than in America’s troubled housing sector.

The recent flurry of real estate bidding wars on both sides of the border has emboldened those who claim the housing crisis is over. But for every drooling homebuyer, there are hundreds of thousands of homeowners trapped in houses they’re struggling to afford. And the situation, especially in the U.S., is about to get much, much worse.

Just like in the auto sector, it’s Uncle Sam who’s driving the supposed rebound in housing, says Rosenberg. Last winter Congress introduced a US$8,000 tax credit for first-time homebuyers, and the program has proved wildly popular. Rosenberg estimates 85 per cent of the housing activity in the U.S. right now is being supported by Washington. (We saw just how fragile the housing recovery was last week, when both new and used home sales failed to meet economists’ rising expectations.) So it’s no surprise the real estate industry in America is lobbying hard for the credit to be extended beyond its Nov. 30 deadline, and even expanded to US$15,000. If Washington pulls the plug, it could send the housing market spiralling again.

What the housing stimulus hasn’t been able to do is offer any support to the growing number of Americans underwater on their mortgages. According to a report last month by Deutsche Bank, by the year 2011 as many as 25 million Americans, or 48 per cent of those with mortgages, will owe more than their homes are worth. The situation isn’t expected to improve for a long time to come. Moody’s, the rating agency, predicts average house prices won’t return to their 2006 peak levels until at least 2020.

That suggests we won’t see a slowdown in foreclosure activity any time soon. As it is, the rate of foreclosure is near record highs, according to RealtyTrac, a real estate research firm. In August, 358,000 houses went into foreclosure in the U.S., 18 per cent more than in the same month last year, when the meltdown was in full force and the world was gripped by foreclosure horror stories. The problem is, even as America struggles to cope with the fallout from the subprime debacle, a second and third wave of foreclosures is about to hit. Daren Blomquist, with RealtyTrac, says the next wave will be triggered by the continued rise in unemployment levels. We’re already seeing signs of that. Until recently, the foreclosure crisis had mostly struck those cities in Sunbelt states like California, Arizona and Florida, where the housing bubble was most egregious. But recently, cities with high unemployment levels in Oregon, Utah and Idaho have started popping up on RealtyTrac’s monthly list of the top 10 hardest hit areas.

And a third wave of foreclosures is expected to hit next year, when huge numbers of “Alt-A” and “option ARM” loans come due. Those loans were used by buyers who either weren’t able to provide necessary documentation or couldn’t afford the higher-end homes they wanted to own. “It’s going to prolong the pain we’re going through,” says Blomquist.

Unfortunately, housing isn’t the only problem in the real estate market. Though it receives far less attention, the commercial real estate sector is in dire straits, and the repercussions for the economy are even greater. As with housing, commercial property values have been in free fall over the last two years. The Moody’s/REAL Commercial Property Price Index, which tracks the sector, is down 39 per cent from its all-time peak in 2007. Likewise, banks, hedge funds and institutional investors are all heavily exposed to the commercial market through their loans and investments in the sector. Yet an increasing number of buildings sit empty. It’s not just a problem in the U.S. Last week CB Richard Ellis, a brokerage firm, revealed office vacancy rates have risen almost 50 per cent in Canada in the past year. In some markets, like Calgary, as much as 13.1 per cent of space now sits empty—a remarkable reversal from the city’s boom days.

As prices crumble and vacancy rates soar, more and more borrowers are failing to keep up with their payments. It’s left some economists worrying about yet another banking and credit crisis as financial firms grapple with these massive losses. According to a report by Richard Parkus, a commercial mortgage analyst at Deutsche Bank, as many as 65 per cent of commercial mortgages coming due in the next five years won’t qualify for financing. As such, banks may have to write off 10 per cent of the US$1 trillion in commercial real estate loans sitting on their books. Such a scenario could be avoided if employers started hiring again to fill up all that empty office space. But as it is, companies are axing employees by the hundreds of thousands a month, and there are few signs that’s about to change.

Last week, workers at the Caesars Windsor casino in Windsor, Ont., were warned by their union that layoffs could be on the horizon as business continues to slow. Meanwhile, in Plattsburgh, N.Y., 200 workers at a Bombardier railcar plant were given notice that layoffs could begin in December. For tens of thousands of workers across the United States and Canada, the prospect of more job losses still looms large. America’s unemployment rate now sits at 9.7 per cent, a 26-year high. When the latest job figures came out in September, some diehard optimists grasped for any faint sign of hope—at least job losses slowed slightly in August, compared to the month before, they said. Unfortunately, that trend may not hold. New Labor Department data shows that mass layoffs (job cuts involving 50 or more employees) actually jumped sharply in August after improving in previous months. But even if the bad news about jobs does become a little less bad, says Rosenberg, it doesn’t really matter. “You can’t feed your kids or pay your bills with less negative data.”

In the U.S., 15 million people are now out of work and a third of them have been without a job for six months or longer—a record high. Meanwhile, rates of underemployment (the laid-off banker who has found work as a waiter) are also at record highs. In hard hit areas, the unemployment rate is staggering. California hit a new postwar high in August of 12.2 per cent unemployment. By some estimates, Michigan’s unemployment is set to hit 15 per cent. Canada is struggling too, with 1.6 million people out of work. According to a recent report from the Organisation for Economic Co-operation and Development, unemployment could hit 10 per cent next year, up from the current rate of 8.7 per cent. Among young Canadians between the ages of 15 and 24, unemployment is already over 16 per cent—an 11-year high.

Economists often say that unemployment is a lagging indicator, meaning that the economy must improve before we see companies confident enough to start hiring again. But the reality is that unemployment is only getting worse. Many jobs in manufacturing, construction and finance that only existed because of the bubble are gone for good. “Now what?” asks Shedlock. “Where’s the driver coming from for jobs?”

This is a question with no easy answer. “Unemployment is probably going to keep rising for much of the next year. People aren’t going to think of it as a recovery,” says Dean Baker, an economist with the Center for Economic and Policy Research in Washington, who correctly foresaw the recession. Even if the economy grows at a healthy rate of three per cent, that creates between 100,000 to 150,000 jobs a month, says Ablin, the CIO of Harris Private Bank. At that rate, it would take four years to get back all the jobs that have been lost over the past year and a half. Efforts by government to create jobs through make-work stimulus projects are also at best temporary measures.

Many of these problems loom largest in the United States. In most respects, Canada has weathered the downturn far better. Job losses are not as severe, the housing market hasn’t crashed, and credit markets never completely dried up. “There’s a very significant difference between what we’ve seen in Canada compared to the U.S.,” says Sherry Cooper, the chief economist with BMO Capital Markets. “This was not a made-in-Canada recession by any stretch.” As such, the Canadian economy will be stronger than the U.S. economy in the coming quarters, she adds.

But that’s not to say roadblocks to a recovery don’t exist here, too. A good portion of the jolt the Canadian economy has felt in recent months has come thanks to the same thing that’s been juicing the stats in the United States: government dollars. Take the cash for clunkers program. The demand for cars in the United States almost single-handedly pushed up manufacturing sales in Canada by 5.5 per cent in July (the biggest monthly jump since 1998). Wholesale sales in Canada were also up thanks to auto exports. It’s hard to find a positive growth number in Canada that hasn’t in some way been driven by consumer demand in the U.S. Ultimately, Canada must face the same tough question as its main trading partner: what happens when the free-money tap is shut off and U.S. consumers stop buying?

In 2007, there were plenty of onlookers who watched the United States slipping into recession, and who argued that Canada would be immune to the coming crisis. The strength of Alberta’s oil wealth alone could keep Canada in the black, they argued. Even esteemed economists floated the possibility that if the U.S. sneezed, Canada might not catch a cold. That proved to be fanciful thinking. By the same token, there will be no quick recovery in Canada without recovery in the United States. “We are along for the ride,” says the Conference Board’s Hodgson.

The most optimistic forecasters still cling to the hope that we’re experiencing the beginning of a V-shaped recovery. As quickly as the economy nosedived, it will surge upward again on new-found consumer confidence and carefully timed government spending. The bears predict we’re due for more of a W-shape, where a rebound is followed by another dive into recession. Others point to a more gradual U-shape or even a long, drawn out L-shaped recovery. But the real outcome may well be an alphabet soup of all of these things, strung together over the coming years so that the economy and capital markets never really grow.

It has happened before. People may be feeling richer as they watch the markets rebound and their net worth rise again, but to some observers, this is the same kind of false start that has haunted Japan for so long. That country suffered a “lost decade” in the 1990s after its housing bubble burst. It continues to struggle to this day. “The reality is a 60 per cent jump in six months is not the hallmark of a bull market, it’s generally what you see in a secular bear market,” says Rosenberg. “Japan has had no fewer than four of these 50 per cent plus rallies, in the context of a market that’s down over 70 per cent from its peak.” Shedlock puts it in even starker terms: “This is the most massive suckers’ rally since the Great Depression.”

The unfortunate reality is that until households get their finances in order and are capable of spending again, the corporate sector won’t rebound and neither will jobs. That’s a healing process that could take years. So as bullish analysts and pundits feverishly ramp up their forecasts, maybe it’s time instead to listen to what those who predicted the crisis the first time around are warning—look out below.

]]>As the credit crunch veered out of control last month, taking out pedestrians on Wall Street and Main Street and knocking over banks like tenpins, the contemporary art market was ticking along handsomely. In a two-day sale in mid-September, Sotheby’s of London auctioned off 223 works by the former bad boy of British art, Damien Hirst. When the gavel finally fell on the last lot, Hirst was $200 million to the good, a record haul for an auction devoted to a single artist.

Not all in the art world were impressed. Particularly unimpressed was the great critic Robert Hughes, who wrote a magnificently sour piece for the Guardian in which he declared that the auction’s only remarkable aspect was that it revealed the yawning chasm between the prices for Hirst’s work and his actual talent. He called Hirst a “pirate” whose only skill is his ability to bluff and flatter the dumb, ignorant, and rich, and blamed him for almost single-handedly creating the cult of artist-as-celebrity, and feeding the “irrational faith in a continuous rise in prices.”

There is no question Damien Hirst is a genius at both self-promotion and self-enrichment. He’s been riding a bull market in contemporary art for over a decade now. Earlier this year the Times of London pegged his net worth at US$364 million—and that was before his landmark auction at Sotheby’s.

Hughes is also right about the parallels between the world of high art and high finance. Both appear to be bubble-driven markets, sustaining absurdly inflated prices based on the expectation that prices will endlessly spiral upward. Over the past decade, the Mei Moses All Art index (a sort of TSX for art investments) has outperformed bonds and bills, and in the first half of this year it gained a solid 7.4 per cent even as the S&P 500 was enduring double-digit declines.

But even this spirited bull appears to be flagging. The art market typically lags about six months to a year behind the stock market, and there are signs of a softening in prices for contemporary art. Just this week, an unfinished portrait of the painter Francis Bacon by his friend Lucian Freud sold for $11.1 million. Preposterous money by any earthly standard, but well short of the $14.3 million it was expected to fetch.

As a businessman, Damien Hirst has impeccable instincts, given the auction’s timing. What about his art? His works include the spot paintings, photorealist drawings of pharmaceuticals, and those notorious installations involving dead and dismembered animals. His most famous installation is a 14-foot stuffed and pickled tiger shark, bought for $12 million in 2005 by a hedge fund billionaire from Connecticut.

Hughes hates all of it. “The idea that there is some special magic attached to Hirst’s work that shoves it into the multi-million-pound realm is ludicrous,” he says. But there is a special magic attached to Hirst’s work. That magic is the spectacularly successful brand known as Damien Hirst. And for those to whom the brand is successfully marketed—hedge fund types, of course, but anyone else who happens to be cash-rich but taste-poor—it makes his products worth every cent.

In a recent book about contemporary art, The $12 Million Stuffed Shark, York University business professor Don Thompson observes that “there is almost nothing you can buy for $12 million that will generate as much status and recognition as a branded work of contemporary art.” As he says, some people think a Lamborghini is vulgar, and lots of people can afford yachts. But put a Damien Hirst dot painting on your wall, and the reaction is, “Wow, isn’t that a Hirst?”

The point is, Hirst is not selling art, he’s selling a cure for rich people with severe status anxiety. Hughes says of the shark, “One might as well get excited about seeing a dead halibut on a slab in Harrods’ food hall,” which is a fancy way of saying “my pet monkey could do that.” But snarkiness over sharkiness isn’t serious art criticism, and judging Hirst’s work by the criteria of technical skill, artistic vision, and emotional resonance is like complaining the Nike swoosh is just a check mark.

Hughes does have one serious concern about the “Hirst effect.” With skyrocketing prices, public museums and galleries are being repeatedly outbid by individuals or corporations. “And when you have some Russian squillionaire who started buying art three minutes ago but has the GNP of Georgia in his pocket, how can museums compete?”

But you can’t complain contemporary art is fatuous and dull, and then lament it is being bought up and hidden away in private collections—this restaurant is terrible, and the portions are so small. If anything, the Damien Hirsts of the world provide a valuable service, luring squillionaire money away from the real art that public institutions are after.

In any case, the financial crisis is resulting in corporate art dumping—Lehman Brothers just announced it will sell off its collection of 3,500 pieces. As all of this big-time contemporary art floods onto the market, public institutions will be able to pick up such major brands as Barnett Newman, Jasper Johns, and yes, Hirst at fire-sale prices—an irony that even Robert Hughes might appreciate.

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http://www.macleans.ca/general/ho-hum-hummer/#commentsFri, 25 Jul 2008 21:35:04 +0000http://macleans.wordpress.com/?p=3753There’s never been a worse time to try to sell a used Hummer. On Wednesday the New York Times Wheels blog looked at the deluge of Hummers available on Craigslist,…

]]>There’s never been a worse time to try to sell a used Hummer. On Wednesday the New York Times Wheels blog looked at the deluge of Hummers available on Craigslist, and the steep price cuts sellers are having to swallow in order to unload their 3-ton, gas-guzzling beasts. Now the B.C. government is trying to sell a tripped out Hummer that police seized from a Vancouver Island drug dealer. And judging from the auction so far, it’s not going well either.

As the picture shows, this ain’t no typical Hummer. According to a press release, the 2003 H2 has “Lamborghini-style hydraulic doors, a $16,000 custom audio system with four huge rear-facing speakers, a navigation system, and TV screens mounted in the front headrests of its beige leather seats.” Perfect for those long stretches between drug deals in Comox and Duncan. Along with a second SUV, a relatively plain 2002 GMC Denali, the government pegs the combined value at $60,000 and says the money will go to support community projects.

Good luck getting that kind of dough. So far the auction (you need to register to see it) has garnered a top bid of just $20,600, yet according to a pricing calculator at VMR Canada an H2 with similar specs (not including the TVs, custom stereo and wigged out doors) is worth $29,375. There’s still 11 days left in the auction, mind you, so maybe there’s someone out there who doesn’t care that it’ll cost $140 to fill up the tank. Besides, when all those Prius drivers flip you the bird, you can be assured your money went to a good cause.